EU to formalise new sugar regime today

The Agriculture & Fisheries Council will formally adopt new sugar reform regulations today after months of fine-tuning the final wording.

The basic points of the agreement however remain the same.

On 24 November 2005, EU agriculture ministers reached political agreement on a wide-ranging reform of the Common Market Organisation for sugar, based on the proposal tabled by the European Commission in June 2005.

The guaranteed price for white sugar will be cut by 36 percent over 4 years; farmers will be compensated for 64.2 percent of the price cut through a decoupled payment - which will be linked to the respect of environmental and land management standards and added to the Single Farm Payment.

Countries which give up more than half of their production quota will be entitled to pay an additional coupled payment of 30 percent of the income loss for a temporary period of five years; a generous voluntary restructuring scheme will be established to provide incentives for less competitive producers to leave the sector; intervention buying of surplus production will be phased out after four years.

The EU believes that reform will enhance the competitiveness and market-orientation of the EU sugar sector, guarantee it a viable long-term future and strengthen the EU's negotiating position in the current round of world trade talks.

It will bring a system, which has remained largely unchanged for almost 40 years, into line with the rest of the reformed Common Agricultural Policy (CAP).

But Some New Member States are likely to express reservations today. In Poland for example, the new sugar reform is not only viewed as bad news for the country's sugar beet industry, but for the Polish economy as a whole.

Poland currently has the highest unemployment rate in the EU and has been hovering at about 18 per cent for more than a year. A recent situation report by the US Foreign Agricultural Service (FAS) said Polish officials opposed EU plans to merge A and B quotas: sugar for domestic use at guaranteed prices and sugar for export at guaranteed prices.

But the implementation of the new sugar regime, which comes into force in July this year, is now a foregone conclusion. Some market analysts suggest in fact that the new regulations will enable the most competitive players in the European sugar industry to continue operating.

Standard & Poors for example said that over the initial four years of the reform process, transition measures, such as the use of protected reference prices and the reliance on a voluntary incentive scheme for farmers and processors to relinquish their quotas, should ensure that EU sugar production is reduced by about one-third by encouraging the exit of the less efficient manufacturers.

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